Gains and Losses on Pensions, Other Retirement Benefits or Other Post Employment Benefits Assumption Changes
DRAFT
April 7, 2011
PREPARED BY:
UNITED STATES STANDARD GENERAL LEDGER DIVISION
ACCOUNTING SYSTEMS AND STANDARDS DIRECTORATE
GOVERNMENTWIDE ACCOUNTING
FINANCIAL MANAGEMENT SERVICE
U.S. DEPARTMENT OF TREASURY
Version History
VersionNumber / Date / Description of Change / Effective TFM
1.0 / 4/07/11 / Original version. / TFM S2-10-02
Gains and Losses on Pensions, Other Retirement Benefits or Other Post Employment Benefits Assumption Changes
Background
Effective in fiscal year 2010, a Gains/Losses on long-term assumptions line was added to the Statement of Net Cost. The line was added to implement Statement of Financial Accounting Standard No. 33 (SFAS), Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates.
Statement of Financial Accounting Standard No. 33 requires that gains and losses from changes in assumptions long-term obligations be highlighted on the Statement of Net Cost. Highlighting the gains and losses will provide more transparent information regarding the underlying costs associated with these liabilities. The standard applies to agencies that report liabilities and expenses for federal employee pensions, other retirement benefits (ORB), and other postemployment benefits (OPEB) including veterans’ compensation, in general purpose financial reports. The Statement does not apply to the Federal Employees Compensation Act program. (Reference: SFAS No. 33)
The standard also requires disclosure of the components of the expense associated with federal employee pension, ORB, and OPEB liabilities in the notes to the financial statements. Such disclosure will provide useful information for analysis. The information will be comparable across agencies and between postemployment and retirement programs. Notes to the financial statements are not addressed in this scenario.
The FY 2010 and FY 2011 Statement of Net Cost crosswalk prepared by the USSGL Division, included a new line (Line 4: (Gains)/Losses on long-term on Pension, ORB or OPEB Assumption changes) to implement SFAS No. 33. USSGL Accounts, 7190, Other Gains, and 7290, Other Losses, was crosswalked to the line with a footnote, indicating to only report the portion of the balance in the account related to the change in long-term assumptions used to estimate actuarial liabilities. All other amount balances recorded in the accounts should be reported on the appropriate lines on the Statement of Net Cost.
To clearly capture the gains and losses amount and to eliminate the crosswalk footnote, the USSGL Division is proposing two new USSGL Accounts to capture amounts related to the gains and losses on changes in long term assumptions. The proposed accounts are illustrated in this scenario.
Page 7 of 10
April 7, 2010
IRC Meeting
Presented by: Melinda Pope
Gains and Losses on Pensions, Other Retirement Benefits or Other Post Employment Benefits Assumption Changes
PROPOSED NEW USSGL ACCOUNTS
Effective FY 2012
Account Title: Gains on changes in long-term assumptions
Account Number: 7170
Normal Balance: Credit
Definition: The gain on the change in long-term assumptions used to estimate federal employee pension, other retirement benefit and other postemployment benefit liabilities, including veteran’s compensation.
Justification: The Statement of Net Cost Crosswalk was revised to display costs related to Gains and losses from changes in long-term assumptions displayed separately from other costs on the statement. The change included adding a new line (4) to the Statement of Net Cost which the effective date is Fiscal Year 2010. SFFAS 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from changes in Assumptions and Selecting Discount Rates and Valuation Dates (paragraph 1) indicates this change. (Reference: OMB Circular A-136, August 2010)
Account Title: Loss on changes in long-term assumptions
Account Number: 7270
Normal Balance: Debit
Definition: The loss on the change in long-term assumptions used to estimate federal employee pension, other retirement benefit and other postemployment benefit liabilities, including veteran’s compensation.
Justification: The Statement of Net Cost Crosswalk was revised to display costs related to Gains and losses from changes in long-term assumptions displayed separately from other costs on the statement. The change included adding a new line (4) to the Statement of Net Cost which the effective date is Fiscal Year 2010. SFFAS 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from changes in Assumptions and Selecting Discount Rates and Valuation Dates (paragraph 1) indicates this change. (Reference: OMB Circular A-136, August 2010)
PROPOSED REVISIONS TO USSGL ACCOUNTS
Effective FY 2012
Account Title: Gains on Disposition of Assets - Other
Account Number: 7110
Normal Balance: Credit
Definition: The gain on the disposition (such as sale, exchange, or disposal, or retirement) of assets not associated with investments or borrowings/loans.
Account Title: Losses on Disposition of Assets - Other
Account Number: 7210
Normal Balance: Debit
Definition: The loss on the disposition (such as sale, exchange, or disposal, or retirement) of assets not associated with investments or borrowings/loans.
Account Title: Other Gains
Account Number: 7190
Normal Balance: Credit
Definition: The gain on assets resulting from events other than disposition. This excludes amounts related to the gain on the change in long-term assumption used to federal employee pension, other retirement benefit and other postemployment benefit liabilities, including veteran’s compensation.
Account Title: Other Losses
Account Number: 7290
Normal Balance: Debit
Definition: The loss on assets resulting from events other than disposition. This excludes amounts related to the loss on the change in long-term assumption used to federal employee pension, other retirement benefit and other postemployment benefit liabilities, including veteran’s compensation..
Listing of USSGL accounts used in this scenario
2610 / Actuarial Pension Liability
2620 / Actuarial Health Insurance Liability
2630 / Actuarial Life Insurance Liability
2690 / Other Actuarial Liabilities
3310 / Cumulative Results of Operations
6800 / Future Funded Expenses
7170 / Gains on changes in long-term assumptions
7270 / Loss on changes in long-term assumptions
USSGL Account Number / Normal Balance / Fed/Non Fed / Trading Partner / Exch/ Nonexch / Budget Subfunction / Cust/ Noncust / Entity/ NonEnt / Covered/Not Cov / Program Indicator / Budgetary Impact Ind
7170 / C / Y / Y / Y / Y / Y / Y
7270 / D / Y / Y / Y / Y / Y / Y
USSGL Account Number / Balance Sheet / Net Cost / Net Position / Custodial Activity / Reclass Balance Sheet / Reclass Net Cost / Reclass Net Position
7170 / 32, 33 / 4 / 9, 13 / 9.1, 9.2 / 4 / 5.7, 6.4
7270 / 32, 33 / 4 / 9, 13 / 9.1, 9.2 / 4 / 5.7, 6.4
A beginning trial balance is not applicable in this scenario.
1. To record the liability for cost to be funded in the future related to federal pensions, ORB and OPEB, including veterans’ compensation.DR / CR / TC
Budgetary Entry
None
Proprietary Entry
6800 Future Funded Expenses
2610 Actuarial Pension Liability
2620 Actuarial Health Insurance Liability
2630 Actuarial Life Insurance Liability
2690 Other Actuarial Liabilities / 150,000 / 20,000
40,000
60,000
30,000 / B420
2. To record a gain on change in long-term assumptions related to federal pensions, ORB and OPEB, including veterans’ compensation.
DR / CR / TC
Budgetary Entry
None
Proprietary Entry
2610 Actuarial Pension Liability
2620 Actuarial Health Insurance Liability
2630 Actuarial Life Insurance Liability
2690 Other Actuarial Liabilities
7170 Gains on changes in long-term assumptions / 10,000
7,000
8,000
9,000 / 34,000 / New
3. To record a loss on change in long-term assumptions related to federal pensions, ORB and OPEB, including veterans’ compensation.
DR / CR / TC
Budgetary Entry
None
Proprietary Entry
7270 Loss on changes in long-term assumptions
2610 Actuarial Pension Liability
2620 Actuarial Health Insurance Liability
2630 Actuarial Life Insurance Liability
2690 Other Actuarial Liabilities / 24,000 / 5,000
8,000
6,000
5,000 / New
Pre-closing Adjusted Trial Balance
/Debit
/Credit
BudgetaryNone
Total / -0- / -0-
Proprietary
2610 / 15,000
2620 / 41,000
2630 / 58,000
2690 / 26,000
6800 / 150,000
7170 / 34,000
7270 / 24,000
Total / 174,000 / 174,000
Closing Entries
1. To record the closing of losses and miscellaneous items into cumulative results of operations.DR / CR / TC
Budgetary Entry
None
Proprietary Entry
7170 Gains on changes in long-term assumptions
3310 Cumulative Results of Operations
7270 Loss on changes in long-term assumptions / 34,000 / 10,000
24,000 / F340
(modify)
2. To record the closing of revenue, expense, and other financing source accounts to cumulative results of operations.
DR / CR / TC
Budgetary Entry
None
Proprietary Entry
3310 Cumulative Results of Operations
6800 Future Funded Expenses / 150,000 / 150,000 / F336
Page 7 of 10
April 7, 2010
IRC Meeting
Presented by: Melinda Pope
Gains and Losses on Pensions, Other Retirement Benefits or Other Post Employment Benefits Assumption Changes
Post-closing Trial Balance
USSGL Account
/Debit
/Credit
BudgetaryNone
Total / -0- / -0-
Proprietary
2610 / 15,000
2620 / 41,000
2630 / 58,000
2690 / 26,000
3310 / 140,000
Total / 140,000 / 140,000
Balance Sheet
Assets15. Total Assets / 0
Liabilities
24. Federal Employee and Veteran Benefits (2610E, 2620, 2630 & 2690E)
28. Total Liabilities / (140,000)
(140,000)
Net Position
33. Cumulative Results of Operations – Other Funds
(Note 21) (6800E, 7170E, 7270E) / 140,000
34. Total net position / 140,000
35. Total liabilities and net position / 0
Page 7 of 10
April 7, 2010
IRC Meeting
Presented by: Melinda Pope
Gains and Losses on Pensions, Other Retirement Benefits or Other Post Employment Benefits Assumption Changes
Statement of Net Cost
Gross Program costsProgram A
1. Gross costs (note 22) (6800E) / 150,000
2. Less: earned revenue / 0
3. Net program costs (calc. line 1 minus 2) / 150,000
4. (Gains)/Losses on Pension, ORB or OPEB Assumption changes (7170 and 7270) / (10,000)
5. Net program costs including assumption changes (sum of
lines3 through 4) / 140,000
8. Net cost of operations (calc. line 5) / 140,000
Statement of Changes in Net Position
Budgetary Financing Sources6. Non Exchange Revenue
14. Total Financing Sources (calc. line 6) / 0
15. Net Cost of Operations (+/-) / 140,000
16. Net Change (calc line 14 minus 15) / 140,000
17. Cumulative Results of Operations (sum of lines 3 and 16) / 140,000
Unexpended Appropriations:
26. Total Unexpended Appropriations / 0
27. Net Position (sum of lines 17 and 26) / 140,000
Page 7 of 10
April 7, 2010
IRC Meeting
Presented by: Melinda Pope